Sunday, September 23, 2012

Reynolds' Law

Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.

About what is he speaking?

The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.

This is part of where socialism and other redistributionist policies go wrong.

And thus, the ever-increasing list of useless majors was born. I have yet to see a job ad for a professional philosopher, a sociologist, a [insert people group here] studier, or a "liberal artist/studier" (or whatever it is you do with a degree in liberal arts/liberal studies).

If you can identify what the middle class markers are that are being subsidized, mazenko, perhaps we could discuss that. Otherwise your question is akin to throwing ca-ca at the wall and seeing what sticks.

"Does that go for subsidizing the oil companies, professional sports teams, banks, and agribusinesses, too?" Those are red herrings--how are those things subsidized markers of middle class?Leaving the red herring aside, let us add some subsidized things to your "gotcha" list--does that go for Hollywood, "green" businesses such as Solyndra, and free birth control for everybody?

"The government" doesn't decide anything. Anthropomorphizing a mindless organization doesn't imbue it with decision-making ability so it's we, the people, who do the deciding. Since the biggest single chunk of humanity in this nation is the middle class it's a cinch that policies that appeal to the middle class are likely to be winners.

And while I don't disagree with Reynolds observations about the damaging effects of subsidies I'd offer that there's an overarching quantity at work undermining "self-discipline, the ability to defer gratification, etc." and that's the unprecedented degree of wealth Americans enjoy. Wealth encourages the sort of recklessness that gets you into trouble and then softens, or deflects entirely, the consequences of that recklessness. Does the name "Lindsay Lohan" ring a bell?

Where subsidies are damaging is to wealth formation.

Subsidies necessarily take wealth from the productive areas of society and move it to less productive areas of society. For example, at a time when steel-making technology was changing rapidly the steel industry, and the steel industry unions, enacted a large tariff, to forestall the need to compete. The steel-buying sector of the economy had to pay above-market rates to support the steel-making part of the economy thus lowering the wealth formation rate for the entire nation.

Economically, which is to inevitably, the smart play would have been to let the steel industry sink or swim on its own competitive strengths. "Inevitably" because there's only so much wealth you can throw at an uneconomic sector of the economy before you kick off a political backlash.

And so it was. The American steel industry crashed and burned rather then either being forced to modernize or forced to come to terms with the fact that there are better uses for American investment capital then propping up an industry that's no longer competitive in the U.S.